Another important Quarterly Result - nX

It would be another important quarterly result from nX, which is due in this month (June'07). Although there is no news release reporting the high receivables of the company, it remains a major concern for investors like us. High receivables has became a major highlight with the cases like Transmile, Megan and Nasioncom. Both Transmile and Megan which drop into the troubles (either poor accounting record for Transmile or false accounting records for Megan) have one similarity. Nevertheless, the similarity is they have high receivables balances. As a result, it has triggered many questions among the investors about the situation of nX. It's trade and other receivables stand at 67mil as at 31 Jan 07, increased by 28mil from last year financial report (as at 30 April 2006) which has been audited.

In my opinion, there may have 3 possible situations for nX regarding its high receivables.

1. It is a norm in the communication industry. In other words, all the balances will be collected eventually. I could not find another competitor for comparison. Some may argue that mtouche and AKN Mess Tech do not have such a high balace of trade receivable. However, I would think we are not comparing an apple to another apple in this case. Both mtouche and AKN Mess Tech do not have the growth level like nX. Of course, I think it would be fair to say that AKN Mess Tech is at its downtrend and would not be able to compare with nX at this moment.

2. nX is facing difficulties in collection. They provide platforms and services to other parties and the customers are not able to pay back to them. If this is the case, nX may face a major impact to their financial condition as they need to write off the bad debts. Any write off would definitely give a bad hit to the financial result as trade receivables is the highest current asset for nX. It will result a lower trade receivables which will be transferred to profit and loss account. With a net profit of RM5mil+ per quarter, I wonder how much nX can absorb this ...

3. The worst case is nX also involves in creating false accounting records. Everything is gone if this is real. Nothing else needs to be mentioned other than cut loss by selling off before it is too late.

Personally, I have full confident over the management team. Therefore, scenario 3 is very unlikely in my opinion.

I hope nX will report another impressive quarterly result in this month. My expectations are higher revenue recorded and higher net profit than previous quarter. nX recorded 28mil revenue and 5.7mil net profit in last quarter.



I also hope that CEO Mr. Tey will come out and explain about the high receiveables.Mr Puan from GPacket has done it and why not nX also do the same thing?